Reason for optimism at Petrofac?

Petrofac (LSE:PFC)

Why is X Factor not shown once every four years? Everyone acknowledges 'Reality' shows are basically garbage, designed to fill these awkward spots between advertising.

Thus, it was with considerable horror we discovered our own favourite show, "Gold Rush", is classed as Reality TV! We thought it documentary - but our reality is better than everyone else's anyway...

Seriously though, if X Factor followed the World Cup model, it would prove more interesting with a wider timeframe allowing some proper talent to emerge. Similarly, if Big Brother followed the example set by the Scottish village of Brigadoon, it would appear only once every 100 years, along with "I'm' a Nonentity, get me out".

What's this got to do with shares? The clue is the word "timeframe" (along with irritation at a granddaughter's fascination with X Factor).

We never deny timeframes are our Achilles heel, though we do feel they are generally impossible to predict accurately.

A recent example was Royal Bank of Scotland, where we'd postulated a target of 265p. It met this target, even exceeded it, and is now rummaging around in the gutter along with politicians searching for integrity.

We "knew" RBS was going to hit 265p and anyone who'd followed our commentary probably cussed when the price actually bettered target. From our perspective, it didn't really matter as we also "knew" 265p would doubtless provoke some stutters anyway, so, despite cursing us when it hit 270p, perhaps a round of drinks are in order with the share price slithering around 244p now.

They key element was it almost had to happen, but we'd no idea how long it would take.

And this is the problem with Petrofac. It has experienced a couple of good sessions recently and we feel guilty, 'cos it had ticked virtually every box to suggest the price really wants to bottom (ideally before) at 180p. At time of writing, it's trading at 444p and needs above 740p (red line on the chart) to force us to shut up about the 180p bottom potential.

But when a 4 quid share starts experiencing 8%-plus days, we must surely pay attention?

From a near-term perspective, it seems some optimism remains possible, as above just 448p calculates as entering a cycle toward 490p next.

While perhaps not the most scintillating of notions, the key ingredient comes if 490p is bettered as our secondary comes in at 568p. Visually, given an ambition of 490p matches the highs of earlier this year, common sense demands some stutters around such a level. So, if chasing a quick trade this presents a sane target.

The 568p thing is a bit more tenuous - remembering an ultimate bottom of 180p remains, exerting its own brand of gravity. But, with closure above 490p, it becomes a difficult thing to ignore as the price could easily accelerate beyond such a point and cover the gap from 615p.

In summary, there are some very real dangers associated with this share price and a poor news report is liable to stuff it downward sharply. For now though, the visuals imply an attempt at 490p is not out of the question and hopefully, with closure above, beyond.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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